18 June, 2013

VicForests cash flow under fire

Victoria's state-owned timber company VicForests has racked up cash losses of $22million since it was formed - equating to a loss of $1.50 for every cubic metre of wood it has logged - an analysis of its public accounts has found.

The review was carried out by the Australian Conservation Foundation's economic unit and concludes the company's cash flow problems and large debt indicate trouble with its core business.

But VicForests rejected the analysis saying it has delivered overall profits since it was created in 2004 and generated billions of dollars in economic activity for the state. The state Auditor-General's Office is currently auditing the management of Victorian forests, including VicForests' operations.

The report was commissioned by the Healesville Environment Watch, which is campaigning against native timber harvesting. The group's chairman, Steve Meacher, said it would be submitted to the Auditor-General to be considered in its review.

The ACF analysis of VicForests financial statements from 2005 to 2012 found the company has current debts of $26.8 million to the Treasury Corporation of Victoria - the state government's financing body - which charges lower interest rates than the commercial market.

But if VicForests was required to pay commercial rates it would struggle further, the report concludes. It also questions changes in accounting methods that have seen a sharp rise in the value of VicForests assets - such as seeds, regenerating coupes and stored and standing timber - in recent years.

The report looks at the amount of cash that is being generated by VicForests and how much it is spending. But it does not look at the company's overall profits and losses.

The report's author Tristan Knowles said that was because cash flows were a better indicator of the health of a company. He said profit and loss statements were more prone to accounting adjustments.

Mr Knowles said because it was paying lower rates, and could rack up cash losses, VicForests was crowding out plantation timber growers with wood logged in native forests.

But Nathan Trushell, VicForests' director of corporate affairs, rejected the report findings. He said it showed ''a limited understanding of VicForests' operations and financial reporting practices and at no point was VicForests contacted to provide the clarification needed''.

''Publicly available information has been used to develop recommendations that are unsupported by the scope of the analysis, ignore the realities of the broader timber industry and disregard the current economic climate,'' he said.

Mr Trushell said VicForests had recorded a net profit of $11.6 million since being created and increased the value of its current assets by almost $20 million during this time.